Quinn group starts talks on its €780m bank and bond debt
Lack of credit rating likely to raise cost of funding ahead
THE Quinn Group has started discussions with banks about the €780m of bank and bond debt due this year. The refinancing will be one of the largest in Irish business in 2010.
The company said it believed a successful conclusion would be reached on renewing the borrowings, which includes €700m of bank debt and €80m of bonds.
The company's attempt to refinance borrowings of this scale may be complicated by the fact it no longer has a credit rating.
The present terms of the €780m debt facility are not known, but the Quinn Group could be facing a significantly higher funding costs due the absence of a rating.
Barclays Bank has previously raised funding for the company through the US private placement market and the last time a fund raising was done it was over-subscribed, but that was five years ago and credit markets are unrecognisable from then.
However, the private placement market remains one of the few avenues for unrated companies to source funds. Renewing the bonds is likely to prove far more difficult.
Some investment funds are precluded from investing in any unrated debt, with some banks similarly barred. However, pension funds, hedge funds and some investments banks are allowed.
Loan data suggests that some of the debt starts maturing this April, but the Quinn Group said yesterday debts do not mature until October. The loans are secured on specific Quinn companies.
"The Group has €700m of bank debt and €80m of bonds which mature in October this year, and is working with its financiers to refinance these facilities. We are confident this will be brought to a successful conclusion over the coming months. There is no final coupon on this debt as interest has been paid on an ongoing basis,'' said the company.
A banking source said yesterday that the cashflows thrown off by Quinn should help it refinance the facilities, but the lack of a credit rating may force the company to make direct presentations to banks.
"There will be investors there looking for extra yield because of the unrated nature of the transaction,'' said one senior financier.
Quinn Group has been trying to put its disastrous investments in Anglo Irish behind it and recently announced plans to undertake possibly two IPOs before 2015. The company's manufacturing businesses have been performing well with record cash flows, the company said recently.
"Last year and its predecessor were difficult for all of us,'' founder Sean Quinn also said in a newsletter to staff.